Most regulators around the world reacted to the 2007-09 crisis by imposing bans or constraints on short-selling. These were imposed and lifted at different dates in different countries, often applied to different sets of stocks and featured varying degrees of stringency. This 2011 article by Professor Alessandro Beber explores the bans on short-selling to aid in identifying their effects on liquidity, price discovery and stock prices.

Using panel and matching techniques, they found that bans:

(i) were detrimental for liquidity, especially for stocks with small capitalization and no listed options;

(ii) slowed down price discovery, especially in bear markets, and

(iii) failed to support prices, except possibly for U.S. financial stocks.

The full version of this article is now available to read below.